Corporate Social Responsibility Now a Staple at Davos

Dinah Wisenberg Brin, |Special to CNBC.com

Sunday, 22 Jan 2012 | 4:56 PM ETCNBC.com

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By year-end, production of Nourimanba, a ready-to-use therapeutic food provided to malnourished children in Haiti, is expected to accelerate, after Abbott Laboratories finishes a new factory there for nonprofit relief group Partners in Health.

Source: abbot.com

Women filling and labeling Nourimanba jars.

The $6.5 million project also is expected to provide income to more Haitian peanut farmers.

Abbott and a philanthropic affiliate have committed millions of dollars and tapped company expertise to help Partners in Health reach a goal of supplying the vitamin-rich, peanut-based food to 50,000 children a year. The existing factory has capacity to provide Nourimanba to 10,000 Haitian youngsters a year.

Abbott also hopes to develop a low-cost, commercial formulation to help defray Nourimanba costs.

“We’re trying to get at the core of some of the greatest challenges that society is facing,” to help make “transformative change that builds economies and strengthens institutions for the long term."

Such efforts are emblematic of increasing “corporate social responsibility,” which also goes by names such as citizenship and sustainability. Businesses are growing more conscious of their environmental, social and governance, or ESG, behavior as investors and consumers increasingly focus on these areas.

Momentum Issue

Corporate social responsibility is likely to have a high profile again at theWorld Economic Forum’s annual meeting in Davos, Switzerland, where the program includes discussions of how "sweeping economic and technological shifts require new business decision-making models" and the need to "embrace a much more holistic, inclusive and qualitative approach to economic development based on the ‘stakeholder’ and not on a pure ‘shareholder’ concept.”

While many big corporations have developed programs over the years, other companies appear to have built themselves around social-responsibility missions, taking care in how they source, manufacture and market products. Meanwhile, various global human rights and investment players are pushing for more social responsibility, with some exploring how to involve stock exchanges.

“A lot of global challenges require active engagement of business,” says Matthias Stausberg, spokesman for the United National Global Compact, an initiative for companies that voluntarily commit to aligning operations with 10 principles covering human rights, the environment, labor and corruption. The compact office is one of a variety of organizations recognizing and promoting corporate sustainability efforts, each with its own criteria.

The compact started more than a decade ago after then-U.N. Secretary-General Kofi Annan called on business leaders at Davos to embrace shared values as a way to promote stability in the new era of globalization. So far, more than 6,800 companies in 140 countries have joined the compact by sending letters from their CEOs and agreeing to report annually on their activities, Stausberg said.

“There is a strong business case for greater corporate sustainability,” Stausberg says. While much of the conversation around the compact initially focused on ethical and moral issues, he says, “over time other players have entered the debate and complemented the moral case with an equally compelling business case.”

Institutional investors looking at ESG issues play a strong role, and view corporate performance from a risk-management perspective, says Stausberg. Consumers have helped cement the case by looking at the environmental and social footprint of the products and services they’re buying, choosing organic food and protesting sweatshop labor, for example.

“It’s not just the fear of being punished by consumers that drives companies,” says Stausberg. Businesses see an opportunity in taking a sustainable approach. “There is a growing class of conscious consumers that demand more sustainable products and services,” he says. “Corporate sustainability is just another way of taking a long-term view to managing your business.”

Sustainability agendas have become much more mainstream in the past decade, notes Bennett Freeman, senior vice president for sustainability research and policy at Calvert Investments, which offers “sustainable and responsible investing” vehicles.

Big Names Step Up

Calvert says on its website that its socially responsible investing philosophy is driven by a belief that, “over time, responsible corporate conduct and solid investment returns go hand in hand.”

Freeman notes that last year, Calvert approved for the first time two corporations it previously had problems with— Coca-Cola and Ford Motor — that have made progress and now meet all the firm’s ESG criteria.

“There’s a lot happening in this space,” adds Deborah Leipziger, a corporate sustainability consultant and author. Companies are shifting from a view of good corporate citizenship as making traditional philanthropic donations to one in which they consider how they affect the environment and society, she says.

Leipziger cited a number of companies she considers to be visionary, including consumer products maker Seventh Generation, which focuses on long-term environmental impacts, and organic yogurt maker Stonyfield Farm, which examines its supply chain — farming, ingredients, treatment of employees, marketing to children — through a social responsibility lens. Both companies have a “social mission in the DNA,” she says.

Leipziger also cites Indian conglomerate Tata, which is involved in community development projects and has established a sustainable human development index to guide its companies in their social responsibility efforts.

Identifying socially responsible companies can be complicated, she said, noting, for example, that many solar panels are produced in China under very poor conditions. “It’s really hard, I think, to find companies that are across the board socially responsible,” she says.

Even the better performers will continue to make mistakes, Calvert Investments’ Freeman says. “What we look for here at Calvert … is overall commitment, and commitment demonstrated through continued performance.”